1. Field of the Invention
The present invention relates to a method and system for administering a variable annuity with lifetime benefit payments; and more particularly, to a data processing method for administering a deferred variable annuity contract, the annuity contract having a payment base value, a contract value, and lifetime benefit payments, wherein the lifetime benefit payment being related to a withdrawal percent and the withdrawal percent automatically increasing over the term of the annuity contract.
2. Description of the Prior Art
An immediate annuity is typically used to provide an income stream within a predetermined length of time from the date the premium is received. The amount of income can be either fixed or variable in nature and typically these products do not provide an account value. A deferred annuity is typically used to provide accumulation and, potentially, a future stream of annuity income. The deferred annuity comprises an accumulation period during which the account value will vary with the underlying investments and an annuitization period where the client purchases an immediate annuity with the account value available. Deferred and immediate annuities typically provide guaranteed income for life which transfers some portion or all of the risk of outliving one's accumulated assets to the insurer.
One basis for distinguishing commonly available deferred annuities is whether the annuity is classified as a “fixed annuity” or a “variable annuity”.
In a fixed annuity, the insurer guarantees a fixed rate of interest applicable to each annuity deposit. Therefore, a fixed annuity is desirable for those seeking a “safe” investment. The guaranteed interest rate may apply for a specified period of time, often one year or more. Often, a rate guaranteed for more than one year is called a “multi-year guarantee”. The rate credited on a fixed annuity is reset periodically, moving in an amount and a direction that correlate the yields available on fixed-income investments available to the insurer.
With a variable annuity, the annuity contract owner bears the investment risk. The relevant life typically has a choice of funds in which he/she can direct where the annuity deposits will be invested. The various funds or sub-accounts may include stocks, bonds, money market instruments, mutual funds, and the like.
Variable annuity contracts typically provide a death benefit. Oftentimes during the accumulation period this death benefit is related to the contract value. That is, if the sub-accounts backing the contract value have performed poorly, then the death benefit may be reduced to an insignificant amount. After annuitization, the death benefit can be a function of the remaining payments of the annuity at the time of the relevant life's death. Further, if the annuity contract does not provide a guarantee (discussed below), the contract will terminate when the contract value goes to zero or some other amount specified in the contract or rider.
Annuity contracts may also provide guarantees in several different variations. A Guaranteed Minimum Death Benefit (GMDB) is a guarantee that provides a minimum benefit at the death of the relevant life regardless of the performance of the underlying investments. A Guaranteed Minimum Income Benefit (GMIB) is a guarantee that will provide a specified income amount at the time the contract is annuitized. The income payment will be dependent on previously stated details set out in the contract. A Guaranteed Minimum Accumulation Benefit (GMAB) is a benefit that guarantees a specified contract value at a certain date in the future, even if actual investment performance of the contract is less than the guaranteed amount. A Guaranteed Minimum Withdrawal Benefit (GMWB) is a guarantee of income for a specified period of time, and in some versions, the income stream is guaranteed for life without requiring annuitization as in the guaranteed minimum income benefit. However, this guarantee will automatically annuitize the contract if the contract value is reduced to zero or some other amount specified in the contract or rider.
Most deferred variable annuity products in the prior art typically determine the amount of the lifetime benefit payments, if any, to be a predetermined percentage of a withdrawal base. The withdrawal base amount is typically set at the time of the first lifetime benefit payment and is fixed for the remainder of the term of the annuity product. Furthermore, the predetermined percentage, or withdrawal percent, is typically set at the time of the first lifetime benefit payment and is fixed for the remainder of the term of the annuity product.
Many financial products and systems have been disclosed. These include: a reinsurance system or plan for a variable annuity contract with guaranteed minimum death benefit; a means for determining a guaranteed minimum death benefit claim value from the variable annuity contract; investment consulting, benefit projection and investment analysis of retirement investments during a pre-retirement accumulation phase and post-retirement distribution phase; investment portfolio selection, allocation, and management to generate sustainable withdrawals wherein the distribution amount is, at least in part, based upon a performance level of individual investments; generating annuity payments using a dynamic asset allocation investment wherein the annuity payment(s) are based on the performance of the automatically allocated assets; and financial instrument(s) providing a guaranteed growth rate and a guarantee of lifetime payments wherein a first guarantee of a protected value is established wherein the protected value includes at least a certain amount based upon the initial account balance growing at a minimum growth rate for a defined period of time, or until one or more defined events occur. Each one of these prior art references suffers from at least the following disadvantage(s): the lifetime benefit payment, if any, is based on a withdrawal percent that does not automatically increase over the term of the annuity contract; the lifetime benefit payment, if any, is determined based on a fixed predetermined percentage of a withdrawal base; and the withdrawal base is typically fixed for the remainder of the contract or, alternatively, decreases during the remainder of the term.
Accordingly, there remains a need in the art for a data processing method for administering a variable annuity contract for a relevant life wherein the annuity contract has lifetime benefit payments and wherein the lifetime benefit payment for each period is related to a withdrawal percent and wherein the withdrawal percent automatically increases over the term of the annuity contract.